Housing horror: Average home loan to hit $1.1m before lending recovers

Australia’s housing market just got hit with a brutal reality check – and it’s bad news for anyone with a mortgage dream.

Fresh analysis by Money.com.au has revealed it could take more than a decade before home lending claws its way back to the levels we saw during the Covid boom, when more than 1300 home loans were being issued on average each day

In fact, home lending won’t return to those levels until at least 2036, new projections show.

According to ABS lending data, owner occupier loans last peaked at 1322 per day in the

March quarter of 2021, fuelled by a record-low cash rate of 0.10 per cent and government support measures during Covid.

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Then, volumes fell by more than a third, to just 822 loans per day in the March 2023 quarter.

That was when the Reserve Bank was in the midst of its rate-hiking cycle.

Now in 2025, loan numbers averaged just 890 per day in the June quarter.

At the current pace of growth, home lending won’t return to its previous highs of around 1300 loans a day until at least 2036, when volumes are projected to reach 1327 per day in the March quarter.

Source: Money.com.au

By then, the average new home loan size is projected to reach $1,145,982 – up 69 per cent from today’s average of $676,434.

Money.com.au’s Mortgage Expert, Debbie Hays, says the road to recovery for Australia’s

mortgage market may be bumpy.

“The stimulus-fuelled peak of 2021 was short-lived, and led to a major trough which we’re

still slowly digging our way out of,” she says.

“The fact it will take a decade to return to those levels under normal growth shows just how distorting housing bubbles can be to the wider market.

“There may also be smaller peaks and troughs along the way. These disproportionately

affect homeowners and first-time buyers, who are the most exposed to swings in borrowing

costs and property prices. When volumes surge, prices rise, and those without a foothold in

the market are locked out.”

New analysis by Money.com.au reveals it could take more than a decade for Australia’s mortgage market to return to its previous heyday.

Ms Hays adds that the next peak will likely occur in a very different environment.

“Borrowers will be facing much higher average loan sizes relative to their incomes, tougher affordability pressures, uncertainty in the jobs market due to AI, and likely an ongoing shortage of housing supply,” she says.

“That’s if another global shock doesn’t intervene before then.”

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